Indian Stamp Bill, 2023: Centre plans to replace the Indian Stamp Act, 1899

On January 17, the Ministry of Finance sought public input on the proposed 'Indian Stamp Bill, 2023.'

Indian Stamp Bill, 2023: The central government has proposed the abolition of the Indian Stamp Act, 1899, and plans to introduce a new legislation to govern the stamp duty system in India. On January 17, the Ministry of Finance sought public input on the proposed 'Indian Stamp Bill, 2023.' 

The Indian Stamp Act, 1899 establishes the legal framework for the imposition of a tax in the form of stamps on documents that record transactions. Stamp duties, while levied by the central government, are collected and appropriated within the states according to the provisions outlined in Article 268 of the Indian Constitution. 

This arrangement allows for the central government to set the rates of stamp duty while giving states the authority to administer and collect the tax, thereby contributing to their revenue.

Stamp Duty

In India, stamp duty is a tax that is levied on legal documents, particularly those that record financial transactions or transfer of assets. The rate of stamp duty varies depending on the nature of the document and the state in which the transaction is taking place, as stamp duty is a state subject in India.

This includes the sale, gift, or lease of property. Stamp duty rates for property transactions are typically a percentage of the transaction value or the agreement value, and they vary significantly from one state to another.

• For home loan agreements, stamp duty is also applicable, generally a percentage of the loan amount.
• When shares are bought or transferred, stamp duty is applicable on the share certificates.
• This includes partnership deeds, Memorandum of Association (MoA), Articles of Association (AoA) for companies, etc.
• Power of Attorney, wills, trust deeds, and other legal documents may also attract stamp duty.

The exact rates and regulations related to stamp duty in India are governed by the respective State Stamp Acts and the Indian Stamp Act, 1899 for those states which haven’t formulated their own acts. It's important to check the specific stamp duty laws and rates in the relevant state where the transaction is occurring.

Additionally, in an effort to simplify the process, some states in India have moved towards e-Stamping, which is a more secure and convenient way to pay stamp duty.

Why is the Indian Stamp Bill, 2023 being proposed?

The Ministry of Finance, in its released statement, highlighted that numerous clauses of the Indian Stamp Act, 1899, have become "redundant" or "inoperative." Notably, the Act lacks adequate provisions for digital e-stamping and fails to provide a consistent legal framework for stamp duties across all Indian states. While the 1899 Act applies to 30 states and Union Territories, six states adhere to their own stamp acts and rules.

In light of these issues, the ministry has suggested the repeal of the current Act and its replacement with new legislation designed to better align with current conditions and objectives.

Notable provisions on the draft of Indian Stamp Bill, 2023

The proposed draft of Indian Stamp Bill incorporates provisions for digital e-stamping. As per Section 2 (18) of the Bill, an "Electronic stamp" or "e-stamp" is defined as an electronically produced mark that signifies the payment of stamp duty, achieved through electronic means or otherwise.

Furthermore, the Indian Stamp Bill includes clauses related to digital signatures. Section 2 (17) clarifies that in the context of instruments, the terms “executed” and “execution” will be understood as “signed” and “signature,” encompassing both the attribution of electronic records and electronic signatures as outlined in the Information Technology (IT) Act, 2000.

The IT Act characterizes “electronic records” as data, records, or data generated, images or sounds stored, received, or transmitted in an electronic format or microfilm or computer-generated microfiche. In the same vein, a digital or electronic signature is described as the process of authenticating any electronic record by a subscriber using an electronic method or procedure.

Additionally, the draft of Indian Stamp Bill proposes an increase in penalty amounts. It suggests enhancing the maximum fine from Rs 5,000 to Rs 25,000 for violations of any provisions of the law, along with a daily penalty of Rs 1,000 for ongoing offences.

Indian Stamp Act, 1899

The Indian Stamp Act, 1899 is a legislative act in India that governs the payment of stamp duty. Stamp duty is a form of tax that is levied on various legal documents to render them valid and legally effective. The Act was originally passed by the British government in India in 1899 and has since been amended multiple times.

Under the Indian Stamp Act, documents such as agreements, contracts, exchange of property, leases, and financial transactions are required to be stamped, indicating that stamp duty has been paid. The duty is a form of indirect tax and varies depending on the nature and value of the transaction or document involved.

firstly, it serves as a revenue source for the government; and secondly, it provides a legal sanction to documents, making them admissible as evidence in courts. The Act specifies the instruments that are subject to stamp duty, the rates of duty, and the penalties for non-payment or underpayment of duty.

The Act is a key piece of legislation in the Indian legal system, ensuring the proper and legal recording of transactions. However, with changes in the economy, modes of business, and technology, various amendments and adaptations have been proposed and implemented over the years to keep the Act relevant and effective.